06-04-2025
6 Financial Products the Middle Class Should Stay Away From
When it comes to building wealth, avoiding the wrong financial products can be just as important as choosing the right ones. Many financial products appear to be convenient or essential, but often come with hidden costs, high interest rates or poor long-term value. Middle-class consumers are often the most vulnerable, as well.
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From high-interest auto loans to misleading 'buy now, pay later' plans, experts said these common traps can quietly drain your finances and derail your financial goals.
Middle-class consumers should steer clear or at least use these products carefully.
Credit cards are not inherently bad — they can be a great tool for improving credit and earning rewards and points. However, that's only if you are able to pay your credit cards off in full each month, said Ashley Morgan, attorney and owner at
The benefits are quickly outweighed when you carry a balance and pay interest, Morgan said. 'Using credit cards to finance things long term is not ideal and very costly. Debt can be an important tool, for example buying a house. But typically credit cards are high interest rates and not an ideal way to carry debt.'
If you need to finance things, look for zero-interest programs or lower interest loans instead, Morgan urged.
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Buy now, pay later (BNPL) programs like Klarna and AfterPay have become popular but can be financially dangerous when overused, Morgan warned.
'It can be easy to over spend when these BNPL programs push the low payment amount. It can make it easy to believe you can afford things that you cannot.'
Because BNPL programs offer the ability to finance things as small as grocery store purchases or restaurant orders, and you can use multiple BNPL plans, before you know it, you can easily be buried in debt.
'Additionally, since these programs delay payments, it may tempt consumers to spend more than they intend to or can afford to pay back,' Morgan said.
If you're living paycheck to paycheck or had a big unexpected expense hit midway through paychecks, it can be difficult to wait for the next one. People may gravitate toward payday loans, but this can be a big financial mistake, according to Yehuda Tropper, CEO of Beca Life Settlements.
Payday loans often have 'triple-digit APRs that trap you in a cycle of debt that becomes very hard to get out of,' Tropper said. If you need cash quickly, look instead into credit union emergency loans or community assistance programs.
You might think that even a small-value life insurance policy with a death benefit under about $20,000 is better than none, but Tropper suggested that's not the case.
'The amount you pay per dollar of insurance is much more expensive than if you get a $250,000 policy.' Tropper shared a story of someone who has been paying $100 per month for 40 years for a life insurance policy, making her total payment about $48,000 for a $50,000 death benefit.
'She's now 60 years old. Had she taken out a $250,000 policy and paid $100 per month she would have had a cash value of over $7,000 — and five times more money for her beneficiaries after she passes away,' Tropper said.
If you're an individual, middle-class investor looking to safeguard your finances amid inflation, economic uncertainty with the tariffs and stock market swings, David Beahm, president and CEO of Blanchard and Company, recommended you stay away from gold ETFs.
While he said that it's a good idea to look at actual commodities like gold, because gold tends to go up in value when the market falls, gold ETFs are different.
'[I]f you buy gold ETFs, you are buying gold stocks, thus getting more exposed to the stock market, not less. Buying physical gold helps you avoid this increased risk exposure.'
Wheels are often necessary, but high-interest auto loans may not be worth even the most reliable transportation, according to Michael T. Gibson, an attorney and founder of Auto Justice Attorney.
At the beginning of a high-interest auto loan, most of your monthly payment goes toward interest instead of reducing the principal, Gibson said. Additionally, new vehicles usually depreciate about 20% in their first year.
'But if you have an accident, insurance only pays the actual cash value of your vehicle. So if you're early in your loan and total your car, you could end up upside-down on the loan, owing money for a car you can't drive,' he pointed out. This leaves you in the position of having to roll negative equity into a new car loan, building even more debt.
'Instead, if you can, put a higher deposit on a car when buying it to bring the interest rate down, and consider a used car to avoid the depreciation issue,' Gibson said.
While many of these products can be tools if used appropriately, try to avoid getting yourself into debt or financial trouble by using them.
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This article originally appeared on 6 Financial Products the Middle Class Should Stay Away From
